Loan against your FD or shares in Nepal: cheaper than a personal loan?
Borrow up to 90% of an FD at roughly its own rate plus 2%, or 70% against NEPSE shares, while the asset keeps working. The full cost and risk math vs a personal loan.
A friend needed Rs 5 lakh for his sister's medical bill last Asar. He had a Rs 8 lakh fixed deposit maturing in eight months and a small NEPSE portfolio. His first instinct, and the bank relationship manager's first suggestion, was a personal loan. The relationship manager quoted around 11%.
He almost took it. What nobody mentioned at the counter is that he was sitting on two assets he could borrow against for a fraction of that, without selling either. Breaking the FD would have cost him a penalty. Selling shares in a soft market would have locked in a loss. Borrowing against them did neither.
The idea: borrow against what you own, don't sell it
The instinct when you need cash is to either liquidate an asset or take an unsecured loan. There is a cheaper third path.
When you pledge an FD or a share portfolio as collateral, the lender's risk drops sharply, and the interest rate drops with it. A loan against your own fixed deposit is treated as fully secured, the safest category a bank lends in, because the deposit it can seize is sitting right there. NRB even assigns share-backed loans a 150% risk weight to keep banks cautious, but for the borrower the secured rate is still well below anything unsecured. You keep the asset, you keep its returns, and you borrow against its value.
Loan against your FD: the cheapest money in Nepal
This is the one almost nobody uses, and it is the best deal on the menu.
Banks lend up to 90% of an NPR fixed deposit's value (about 85% for a foreign-currency FD). The rate is pinned to your own deposit. Everest Bank's published terms are "up to 90% of the deposited amount at 2% higher than the published interest rate." Siddhartha Bank charges "the coupon rate plus up to 2%, or base rate plus 2%, whichever is higher."
Here is the part that makes it cheap. The FD does not break. It keeps earning its coupon for the full term while you borrow against it. So the genuine cost is the spread, not the headline rate:
| Your FD | Loan against it | |
|---|---|---|
| Rate | Earns 7% (say) | Costs 7% + 2% = 9% |
| But the FD keeps earning | +7% | |
| Net cost of borrowed money | ≈ 2% |
Compare that to breaking the FD early, which triggers a premature-withdrawal penalty (typically 1% to 3% off the rate for the period held) and ends the compounding. The whole logic of FD laddering is to avoid breaking deposits; a loan against the FD does the same job for a one-off cash need. The interest you pay is on the loan; the FD's own interest still faces the usual final withholding tax on FD interest, unchanged by the loan.
Loan against shares: cheap, but on a leash
Borrowing against your NEPSE holdings is also cheaper than a personal loan, but it comes with a string the FD loan does not have.
NRB caps the loan at 70% of the share value, where "value" is the lower of the last-traded price or the 180-day average price. That haircut protects the bank against a falling market. Promoter shares are capped lower, around 50%. The facility runs for a maximum one-year tenure, renewable once you have cleared the interest. Rates sit around base rate plus up to 3% (Siddhartha), so a little above an FD loan but still under most unsecured options.
The leash is the margin call. If your pledged shares lose more than 20% of their value, the bank can ask you to top up collateral or repay part of the loan, and it can sell the pledged shares to recover its dues if you don't. The brutal version of this math, where leverage wipes out a small account in a downturn, is the whole subject of margin lending on NEPSE. A loan against shares for a genuine cash need is more conservative than trading on margin, but the same trigger applies: a bad NEPSE month can turn your standby line into a forced sale at the worst possible price.
One recent change worth knowing. NRB used to cap how much any single borrower could take in share loans (Rs 12 crore, then Rs 15 crore, then Rs 25 crore). In October 2025 it removed the per-borrower ceiling entirely. The limit now lives at the bank level, capped at 40% of the bank's core capital, which mostly matters to large investors, not someone borrowing Rs 5 lakh.
The rate comparison, side by side
Same lender, four ways to borrow Rs 5 lakh. Rates are mid-FY 2082/83 ranges from bank rate sheets and aggregators.
| Borrowing route | Indicative rate | Security | Net cost note |
|---|---|---|---|
| Loan against own FD | FD rate + ~2% | The FD itself | FD keeps earning, so net ≈ 2% |
| Loan against shares | Base rate + up to 3% | NEPSE shares (70% LTV) | Margin-call risk if shares fall >20% |
| Gold loan | ~4.76% to 15% | Physical gold | Wide range; A-class banks lowest |
| Personal loan (unsecured) | ~5.3% to 13.89% | None | Highest rate, no asset at risk |
The personal loan is the most expensive because the bank has no collateral. The gold loan range is wide because finance companies price much higher than commercial banks. The two against-your-own-asset routes win on rate, and the FD loan wins outright on both rate and safety. How these compare with an overdraft or gold loan for a small business need is the focus of personal loan vs gold loan vs overdraft.
When each one actually makes sense
The decision is less about the rate and more about which asset you can afford to put at risk.
Borrow against your FD when you have one and the cash need is real but temporary. It is the closest thing to free money in Nepali retail banking: near-2% net cost, no price risk, the deposit intact. Set it up as an overdraft if the bank offers it, so you pay interest only on what you draw.
Borrow against shares when you do not want to sell into a weak market and you are confident you can repay within the year. Accept that a 20%-plus drop forces a top-up or a sale. Never use a share loan to buy more shares; that is leverage, and the margin-lending math shows how fast it ends.
Take a personal loan only when you have no pledgeable asset, or when the amount is small enough that the higher rate over a short term costs less than the hassle of pledging. For a credit-card-sized, very short need, the calculus shifts again.
The risks that bite
Two cautions, because "cheap" is not the same as "free."
The share-loan margin call is the obvious one. Your collateral can fall; your debt cannot. A leveraged position in a NEPSE correction is exactly how disciplined investors get forced out at the bottom.
The quieter risk applies to the FD loan: you are borrowing against your safety net. If that fixed deposit was your emergency fund, a loan against it is still a loan, and a job loss while it is outstanding leaves you with a debt and a pledged deposit you cannot freely touch. Borrow against an FD that is genuinely surplus, not the three months of expenses you are supposed to be holding for emergencies.
What you actually need to know
Three takeaways:
- A loan against your own FD is the cheapest borrowing in Nepal. Up to 90% of the deposit, at the FD rate plus about 2%, with the FD still earning, makes the net cost near 2%. Use it before any personal loan, and before breaking the FD and eating the penalty.
- A loan against shares is cheap but conditional. 70% LTV, base rate plus around 3%, one-year tenure, and a margin call if your shares fall more than 20%. Fine for a short, confident need; dangerous if the market turns against you.
- Match the risk to the asset. The FD loan risks almost nothing but your safety net. The share loan risks a forced sale. The personal loan risks only your wallet, at the highest rate. Pick the cheapest route whose risk you can actually live with.
Weighing whether to break an FD, pledge it, or take a personal loan for a specific amount? Email parjanya57@gmail.com with the numbers and I'll run the net-cost comparison with you.
This post is part of the Nepal Money Basics guide — the saving and borrowing section.